UK phone hacking scandal reaches US

There may be repercussions to the UK phone hacking scandal in the US. An investigation has been called to inquire into allegations that phone hacking was used in New York after September 11. It is likely the SEC will also launch an investigation into possible breaches of American corporate law.

Transcript

LEIGH SALES, PRESENTER: Expectations have reached fever-pitch in Britain as the country prepares for the most astounding chapter yet in the phone-hacking scandal. In a few hours, media mogul Rupert Murdoch will appear before a parliamentary hearing with his son James and former executive Rebekah Brooks. Meanwhile, a whistle-blowing former tabloid reporter has been found dead in unexplained circumstances, another senior police officer at Scotland Yard has resigned, and News Corporation is struggling to keep its share price from haemorrhaging. In America, the heart of the empire, there's mounting pressure for a full-blooded inquiry into the company under the Foreign Corrupt Practices Act. From New York, North America correspondent Michael Brissenden reports.

MICHAEL BRISSENDEN, REPORTER: New York City, the ultimate corporate destination. If you're going to build a global media empire, then this is the natural home for a global headquarters. And here, in the shimmering centre of American media and corporate culture, Rupert Murdoch has always strived to be top of the heap.

RODNEY BENSON, MEDIA STUDIES, NEW YORK UNIVERSITY: He's shaken things up here. I wouldn't say he introduced the more popular-style tabloid style to America media or journalism. We've had that in the past, but he has definitely shaken things up and brought a kind of livelier form of journalism.

SARAH ELLISON, VANITY FAIR: He's not a creature of L.A. He's much more a creature of New York. He's loved the Post for a long time; the Wall Street Journal is based here. Newspapers are his real lifeblood. The New York Post has always been his stamp on New York.

MICHAEL BRISSENDEN: But Rupert Murdoch's stamp on America goes far beyond the old mastheads. The Fox cable television network is the loudest and most lucrative part of an operation that stretches through book publishing, a film studio, a financial news wire, and all the way down to community newspapers. It is a huge corporate success story, but the scandal outside America's cultural orbit is threatening to undermine the company's future.

SARAH ELLISON: News of the World was a newspaper that few Americans knew existed or had paid any attention to. Of course everyone knows the name "The News of the World". What they also know is that it's because of the News of the World, and this thuggish newspaper culture in the UK, that News Corporation had to drop a very promising-looking deal for BSkyB.

MICHAEL BRISSENDEN: Mr Murdoch's operations in Britain are significant, but this is the heart of his empire. Some have already suggested there could be legal consequences in America that flow from the UK scandal. But it has already opened up a broader discussion about the extent of Mr Murdoch's power and influence here in the US.

Fox News in particular takes a tough, pro-Republican position, and some of the most senior Republicans - like Sarah Palin and Mike Huckabee - even have their own programs on the network. But it is the power and influence Mr Murdoch and the Murdoch family have within the company itself that is causing the most immediate concern.

SARAH ELLISON: I think what this has done is puncture the Murdoch myth of infallibility and power. People have always assumed that Murdoch - even though he's a little bit of a livewire and you can't truly know what his reaction is going to be - they have faith he's going to make the right decisions for his business. This is clearly an example where he hasn't done that, and it is to the detriment of the entire company.

MICHAEL BRISSENDEN: Sarah Ellison has been chronicling the News Corp phone-hacking scandal for a US audience for some time. Last month, before the full force of the storm broke, she wrote a lengthy analysis for Vanity Fair and she says prominent shareholders are telling her they'll now push for significant change inside the company.

SARAH ELLISON: It's clearly casting a lot of doubt on Murdoch's judgment: both about the way he's running the company and the fact that he wants his children to succeed him - and their own judgment, James' judgment in particular has been really called into question.

MICHAEL BRISSENDEN: The fact that millions of dollars has been wiped off the stock price in the last two weeks is only adding to that pressure. But the potential bad press for News Corp here in the US has only just begun.

PETER KING, REPUBLICAN CONGRESSMAN: I have called on the FBI to conduct an investigation into the area of whether or not any of the phones of 9/11 victims or their family members were hacked into.

MICHAEL BRISSENDEN: It is a signs of how quickly things have turned here - that a single, unsourced report in a rival British tabloid about an alleged attempt to use the same hacking techniques in New York - has a number of Congress members, including Peter King, calling for an inquiry.

PETER KING: I represented a district that lost over 150 people on September 11, and the thought that anyone would have hacked into the phones of either those who were killed, those who are missing... family members during that tragic time - at any time - especially during that tragic time, to me, is contemptible. I've asked the FBI to make an investigation and report on it. And that, really, is the extent of my comment.

MICHAEL BRISSENDEN: Do you have any evidence that phone hacking was done towards 9/11 victims?

PETER KING: No, what I said was that there are allegations. I want the FBI to investigate them. I'm not making any conclusions at all.

MICHAEL BRISSENDEN: But those who study America's media culture think it's just too different. They struggle even with the suggestion that anything similar would have happened here.

RODNEY BENSON: If there's something to that, that would be devastating... that would be lethal, even maybe, to Murdoch.

MICHAEL BRISSENDEN: Of more immediate concern for News Corp is the possible investigation by the US Securities and Exchange Commission into whether payments made to British police have violated the Foreign Corrupt Practices Act.

RODNEY BENSON: It has been suggested if charges of criminality are proved, that there could be a challenge to Murdoch's TV licences on the basis of issues of the character of the owner. This is on the books as part of the Federal communications legislation when a licence is up for review. The character of the owner can be a criterion that's looked at. If the company is linked to charms of criminality, that could be the basis for revoking the licence.

MICHAEL BRISSENDEN: And that could also impact on the company's future growth plans. With the collapse of the deal to buy the rest of BSkyB in Britain, News Corp now has billions of dollars to spend elsewhere.